The Federal Deposit Insurance Corp. last week dealt a blow that may jar Congress into settling the last outstanding issue of the thrift crisis - paying for pesky long-term bonds used to bail out the industry in the late 1980s.

Repeatedly this year, lawmakers have refused to enact plans to shore up the Savings Association Insurance Fund and make banks assume most of the payments on the Financing Corp. bonds.

But Congress may feel more pressure after the FDIC's July 1 decision allowing thrifts that charter banks to shift deposits out of the high-cost thrift insurance fund into the Bank Insurance Fund. If enough thrifts flee the savings association fund, premium levels may fall below the level needed to cover the Fico bonds. (See related story on page 2.)

Lawmakers have little time to settle the Fico problem, the Clinton administration argues. According to the Treasury Department, a default on Fico bonds could occur during the first quarter of 1997, if not sooner.

As of March 31, the Savings Association Insurance Fund held $451 billion in deposits that were assessable for Fico payments - $118 billion above the required level.

But the base has shrunk $8 billion since December and has lost $490 billion since 1989.

Thrift trade group officials warn that the Fico base may deteriorate faster as thrifts find ways to shift deposits.

"Moving into the third and fourth quarters, unless there is a solution to the premium disparity, more institutions will avail themselves of opportunities to reduce exposure," said Robert Davis, director of government relations for America's Community Bankers.

Bank lobbyists denounce those dire warnings.

"It's possible there will continue to be some decline, but we can't understand how it can be so great," said Robert Strand, American Bankers Association senior economist. "There are structural impediments to shifting deposits - it's just not that easy."

At the current rates of decline, a default is four years away, Mr. Strand said.

But many thrift executives say they are eager to cut loose from the thrift fund. Though their premiums are 23 cents per $100 in domestic deposits, banks pay nothing.

Premiums are so high because the thrift fund is underfinanced and still needs infusions of cash to reach the $1.25 per $100 in deposits require for full capitalization. At current premium levels, FDIC officials don't expect the fund to become fully capitalized until 2001, because roughly $800 million in annual payments is earmarked for the Fico debt.

Eric Sandberg, president of the Texas Savings and Community Bankers Association, said he expects many thrift insurance fund members in his state to shift deposits by launching state-chartered savings bank affiliates.

Since September 1994, new state savings banks formed in Texas are insured by the bank fund. Mr. Sandberg said the Texas Banking Commission will hold hearings this week for two state-chartered savings banks - Coastal Banc in Houston and Beal Bank in Dallas - that have applied to start bank fund insured affiliates.

Mr. Sandberg predicted many more will follow. "Everybody in Texas is aware of the alternatives they need to address because the BIF-SAIF resolution has not passed through Congress," he said.

In addition to setting up their own banks, thrifts can simply convert to commercial banks while still retaining their membership in the savings association fund. Assessments from these institutions, known as "Sasser" banks, do not contribute to Fico because only thrift premiums are earmarked for the bonds.

Mr. Davis predicts that the number of Sasser banks will increase once Congress passes legislation relieving thrifts of back taxes they would otherwise pay on their bad-debt reserves when converting to commercial banks.

As of March 31, there were 316 Sasser banks, with a total $56.7 billion in thrift fund-insured assets.

Also exempt from Fico contributions are "Oakar" institutions - banks that have acquired thrift fund-insured deposits. As of March 31 there were 809 Oakar banks holding $230 billion in thrift deposits.

Together, the growth of Oakar and Sasser deposits has led to 39% of Savings Association Insurance Fund deposits - a total of $287 billion - being exempt from Fico payments.

The phenomenal growth of Oakar and Sasser deposits has prompted the American Bankers Association to call for legislation mandating that Oaker and Sasser premiums be allowed to service Fico bonds.

But Diane Casey, a Grant Thornton banking consultant, said such a move would only delay a Fico default by 18 months.

Although Congress has avoided passing any fix for the thrift fund in 1996, lawmakers last fall, as part of a balanced budget bill, approved a plan to make banks pay $600 million of the Fico obligation. President Clinton, however, vetoed the legislation because of the large cuts in social spending.

Twice in 1996, Congress has come close to passing the thrift fund capitalization again, but it backed off in the face of tenacious bank lobbying.

The Supreme Court also tightened the vise by last week by reminding lawmakers that past congressional inaction increased the cost of bailing out the thrift industry. On July 1, the court ruled that the government must pay for rescinding favorable accounting rules granted to thrift acquirers in the late 1980s.

Several key lawmakers vow to move decisively, including House Banking Committee Chairman Jim Leach, senior members of his committee, and Republican leaders. All have said the thrift fund fix is at the top of their agenda, but no one has come up with a plan Congress is willing to pass.

In a late-hour attempt to break bank-industry opposition to the plan, Rep. Leach on June 27 proposed letting the Treasury Department devise a new Fico payment formula from a narrow menu of options, including the assessment of Fannie Mae, Freddie Mac, and the Federal Home Loan banks.

But Treasury Under Secretary John D. Hawke said the administration has no intention of changing plans now. "We've already made our choice," he said.

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